March 29, 2023


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Goldman Sachs is eyeing a big payout from the Silicon Valley bank deal

As an advisor to the Silicon Valley bank, Goldman Sachs last week tried to raise capital at the last minute to save the company from collapse. But the Wall Street giant also had another role in the bank’s final days, for which he is expected to collect huge fees: he bought a cache of the bank’s debt in a deal that eventually led to concerns about the bank’s viability.

Goldman payday: In exchange for buying $21.4 billion in debt from a Silicon Valley bank — which was booked by the failed lender at a loss of $1.8 billion — Goldman is likely to make more than $100 million, Dell Book has learned.

Goldman wore multiple hats. After Moody’s privately warned a Silicon Valley bank in early March that it could face a potential downgrade, the bank asked Goldman Sachs for advice to help him support his books. A two-part plan to raise capital and buy debt cannot save the Silicon Valley bank. Meanwhile, the compensation Goldman received and how it managed the relationship with the bank could raise new questions.

Did Goldman work “at arm’s length?” I offered Silicon Valley Bank the opportunity to hire another advisor to work on the bond deal, but the lender refused, DealBook learned. Banks often play multiple roles for their clients – and try to say they do so in a level playing field that maintains the necessary walls between teams. But, even then, these deals raise questions — especially in high-stakes situations like this one.

Will the fee be brought up in the clawback debate? After the government took exceptional measures to protect the bank’s depositors, it is expected that there will be tight regulatory oversight. Senator Elizabeth Warren, Democrat of Massachusetts, and others demanding A refund of the bonuses paid by the bank to its executives and the profits they earned from the sale of shares. The Department of Justice, which is investigating the bank’s collapse, recently launched a pilot stimulus recovery program (more on that below).

But while all of this may spark attention and debate, it’s not clear whether Goldman’s charges are directly related to any of these high-level discussions. Bankruptcy judges also allow companies to pay for services prior to bankruptcy, as long as they are negotiated at fair prices and are deemed to have been done “on a commercial basis.” according to the demands of the bank’s creditors, We may soon find out how the bankruptcy judge feels about this. (If a refund is granted, could that money go to the FDIC?)

It is not uncommon for banks to charge such fees. When you buy assets the way Goldman did, the fee is usually in the form of a discount to the market value of the assets. Goldman is paid to cover the financial risks of acquiring a debt pile of this size before it is accumulated. In this case, the assets were mostly highly liquid. Goldman bought out the bank’s at-loss loans to SVB for $1.8 billion. The bank had to disclose this without completing a deal to raise capital – an admission that terrified the markets and eventually led to their failure.

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A Goldman spokesman declined to comment.

Credit Suisse shares hit a record low after its biggest backer ruled out further investment. Inventory dropped sharply After the National Bank of Saudi Arabia said it would not inject more money into the Swiss bank. Credit Suisse’s turnaround plan to expand its investment bank and focus on wealth management was complicated by the fallout from the collapse of Silicon Valley. Shares in other European banks fell on Wednesday.

OpenAI has unveiled a new version of ChatGPT. The startup has launched its latest chatbot version, upping the ante in the AI ​​race; Kid Metz of The Times wrote that it is more capable, but not perfect. Meanwhile, Google is rolling out AI features in core products Like Gmail and Google Docs.

A senior member of the Abu Dhabi royal family is said to be investing in ByteDance. G42, an artificial intelligence company controlled by Sheikh Tahnoon bin Zayed Al Nahyan, has bought shares in the Chinese tech giant from existing investors in $220 billion valuationAccording to Bloomberg. That’s far less than the TikTok owner has been appreciated in recent years, as ByteDance faces political scrutiny in Washington.

Meta will lay off another 10,000 workers. It’s the second round of cuts announced by the social media giant since November as the company embarks on what Mark Zuckerberg, its CEO, calls an “efficiency year” — streamlining operations amid a larger decline in digital advertising and technology spending.

Debate is growing over why Silicon Valley Bank and Signature Bank in Washington failed. But discussions about how to prevent bank collapses in the future are getting more and more complex, including within the Democratic Party.

Decisiveness in Washington gives way to lengthy deliberations. The Times has taken a closer look at how regulators – persuaded by influential financial advisors such as Blair Efron of Centerview Partners and Peter Orsage of Lazard – are bailing out US banks.

What to do next is less clear. It is said that the Federal Reserve Consider stricter rules for medium-sized banks, including a review of their liquidity requirements and stress tests. Some Democratic lawmakers, like Sen. Elizabeth Warren of Massachusetts and Rep. Katie Porter of California, are pushing for Restoration of banking rules It fell through during the Trump administration, a move that raised the threshold for “too big to fail” banks from $50 billion in assets to $250 billion. Rep. Maxine Waters of California said Congress should consider increasing the FDIC’s deposit insurance cap.

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But not all Democratic senators and their allies agree that deregulation in 2018 was the culprit here: John Tester of Montana and Angus King, an independent of Maine, both said they Stand by their voices to step back five years ago. That split, combined with broad Republican opposition to tougher banking rules, means it’s hard to see the legislative path ahead.

Concerns about regional lenders continue to subside. Stocks jumped in smaller banks such as First Republic, Western Alliance and PacWest Bancorp on Tuesday, as investors were reassured by the Fed’s bank support. Shares of Charles Schwab also rose on Tuesday as the company’s CEO said its bank is still Receive deposit inflows.

The job of cleaning up failed banks isn’t over. Investment firms such as Apollo and Blackstone are considering bids to acquire parts of Silicon Valley Bank’s loan book, possibly using With the support of venture capitalists. And Creditors have come together In anticipation of a possible bankruptcy declaration by the bank.

Meanwhile, the organizers started Solicit bids for the signature bank.

BlackRock Chairman Larry Fink has used his influential annual letter to push the world’s business leaders to do more on climate change and turn their words about corporate goals into action. His letter of the year, released on Wednesday, continues that theme but also carries a timely (stark) warning: The banking sector will need to transform itself in the wake of last week’s Silicon Valley bank collapse to survive. .

Bank stocks may have rebounded, but contagion fears – and stagnation – persevere. Fink warned that lenders will have to act differently in an era of high interest rates. They will also face tougher rules and greater regulatory oversight as a result of the failure of Silicon Valley Bank and Signature Bank. He said they would need to hold more capital on their books (which they would likely need to add through capital markets) to avoid the kind of “liquidity mismatch” that led to SVB’s collapse.

Previous Fed cycles of rapid interest rate tightening ‘led to massive financial turmoil’ Such as the bankruptcy of Orange County, California, in 1994, he wrote, and the savings and loan crisis of the 1980s and 1990s. “We don’t know yet if the consequences of the easy money and regulatory changes will fade across the US regional banking sector (similar to the S. & L. crisis) with more forfeiture and closures to come,” he said.

Founded 35 years ago, BlackRock is the largest asset management company in the world With $8.6 trillion under management at the end of the year (down from $10 trillion at the end of 2022). BlackRock has gained significant influence in shaping the investment philosophy of large and small traders. It has also drawn much criticism from the political right for its embrace of environmental, social and governance investment practices.

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In his 20-page letter, Mr. Fink addressed inflation (it will continue at 3.5-4%) and proxy voting (proxy advisors can do more to represent and endorse shareholder opinions).

The Silicon Valley bank failure came as the Justice Department was preparing to launch a new pilot program to hold executives personally accountable for corporate wrongdoing through salary refunds and bonuses. He. She It goes into effect on Wednesday And it applies to all corporate criminal law enforcement actions, which means the bank and its management can end up being a part of that experience.

Calls for a clawback are multiplying. Some lawmakers, like Sen. Elizabeth Warren, D-Massachusetts, are focusing on how to recover bonuses and bonuses for bank executives. And there are others, like actor Ro Khanna from California, who represents the region where Silicon Valley Bank is headquartered Targeting gains from stock sales made by some executives prior to the crash.

Companies that settle with the government and receive compensation may benefit under the new programme. Companies that turn in information quickly and get money back can, among other measures, negotiate lower fines and better deals. The three-year pilot program is part of a broader push by the Biden administration for more institutional and executive accountability.

Executives can also be forced to return profits if there is insider trading. Stock sales by SVB executives will likely come under scrutiny from both the Justice Department and the Securities and Exchange Commission (both agencies declined to comment). Applicable rules may require that any money earned from such trades be returned if there is a conviction or settlement. Some executives, including the bank’s former CEO, Greg Baker, recently sold shares under plans made before the bank ran into trouble. But this is a defense that can be raised against accusations of insider trading, not a guarantee of immunity. Lawmakers are calling on CEOs to return the money voluntarily.


  • Apollo and the Abu Dhabi Investment Authority I agreed to buy UnivarIt is a chemical company for $8.1 billion. (Wall Street Journal)

  • Diamond Sports GroupThe company, the giant owner of the Sinclair Broadcast Group’s regional sports television networks, has filed for bankruptcy. (CNBC)

The best of the rest

  • Disney’s Marvel went to court to force Reddit to detect a leak A copy of the “Ant-Man and the Wasp: Quantumania” dialogue is on her site. (diverse)

  • Bosses pick out job applicants Use ChatGPT in reinforcement(Wall Street Journal)

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